LITERATURE REVIEW 1. To determine why exchange rate and foreign workers remittance related each other.

Remittances can affect outside economic equilibrium by increasing the net foreign asset position of the country. Mussa theoretical model (1984), and Frenkel Mussa (1985), and Alberola Lopez (2001) and Aberola et al. (2002) indicated that the external balance of the economy will be accomplished when any the current account imbalance is offset by the sustained flow of international capital. In contrast, the rate of sustainable in capital flows are shall be the function foreign shares assets and liabilities of the economy, so changes to the net foreign asset position countries will lead to a change in the equilibrium real exchange rate. According to the Dutch Disease Theory which describes the resources that have been found that remittances sent by foreign workers to their home countries correspond to capital inflows similar to those analyzed in the case is analogous to the capital inflows are evaluated according to the impact on the real exchange rate and competitiveness (Corden and Neary, 1982). Large inflows of remittances compared with the size of the recipient economies, can bring can be some unwanted consequences including the possibility of a real exchange rate appreciation and loss of competitiveness in traded economic sectors. There are several previous studies that has estimated that empirical relationship between remittances and the real exchange rate with panel data. Amuedo-Dorantes and Pozo (2004) using panel 13 Latin American and Caribbean countries and find that it is remittances appreciates the real exchange rate in the 1979-1998 of time period. Mandelman and Acosta (2012), found that the inflow of remittances lead to real exchange rate appreciation in the overall sample of 109 countries over of time period from 1992 to 2003.

2. To study whether the real exchange rate appreciation will affect the remittance from foreign workers to their country. The appreciation of real exchange rate (RER) due to huge financial inflows is referred to as Dutch disease phenomena. Dutch disease is used to describe the potential negative effects of large inflows of foreign currency on recipient economy. From my research about the past literature about relationship real exchange rate with remittance, there are very few studies about this topic.

Based on past studies, an increase in remittance inflows leads to appreciation of domestic currency in CIS countries. The price of tradable goods equalized across countries and supposes that changes in the real exchange rate arise mainly from relative movement in the price of non-tradable goods across countries (Akylai Muktarbek kyzy, 2012). Thus, we can assume that the goods that they give in the example as the remittance, it should be have a same effect on real exchange rate as well. Vargas-Silva (2007) used remittances, exchange rates and money demand in Mexico to prove their relationship. The workers have transfer just from one country which is USA and in one currency which is USD that assuming only migrants working there are remittance money to home. So, we can conclude that the real exchange rate appreciation will affect the remittances. The others authors (Mongardini and Rayner, 2009, p17) suggest that there is no relationship between remittances and RER. That analysis showed that remittances and appreciation of real exchange rate has no relationship. This is because remittances are used to capacity utilization with no upward pressure on the price of non-tradable and consequently the equilibrium of real exchange rate. Despite large inflow of worker remittances had been perceived as posing

macroeconomics challenges for the recipient countries. The challenge is it could result in appreciation of equilibrium real exchange rate would tend to affect the international competitiveness of domestic production which is particularly non-traditional exports (Adolfo Barajas, 2010).

3.

To measure the correlation GDP per capita with remittances and also the other factors that will increase GDP per capita in the country. In order to measure the correlation with GDP per capita of remittance and also other

factors that would increase the GDP per capita in the country. Adam, 1998 said in study regarding of remittances often focus to the ability of generate wealth they through their savings and investment, these factors which influence the flow (El-Sakra, 1999), and their impact against economic-the economy recipient in stage of households (Arif, 1999). On the synthesis, remittances may be analyzed in relations context between development and migration with way-pronged three. First of remittances as a source of foreign savings, second of remittances for example the process of wider integration into the

global economy through migration, and the third money order as factors that enable growth. Most of the countries that receive remittances can see the effects of the significant macroeconomic remittances, not only help an increase foreign exchange earnings, but also by reason which is a large part of the country's GDP. Moreover, these resources help expand the market through consumption and investment. Another major characteristic is that foreign of remittances sent cash flow does not necessarily related with the development in the recipient country. They are somewhat related to foreign markets labor, regional economic position of recipient countries and their relationship to more major countries. In terms of economy, the macroeconomic impact of remittances on the receiving countries and the impact on the distribution of those households consignee, one of the effects of international migration is a manifestation of remittances. Total remittances flow continued to rise over the time. Approximate the International Monetary Fund (IMF) and the World Bank, as example, reported that 80 countries accept as much as almost 90 USD billion on year 2002. Orozco (2003f) estimates that the amount flow remittances in world achieve more 180 billion dollars.

4. To investigate the relationship between foreign worker remittances and GDP, in short and long run. The relationship between foreign worker remittances and GDP in short and long run actually occur. Based on past study, the results found that there exist significant positive long run relationship between remittances and GDP in Korea, while, significant negative relationship exist between remittances and economic growth in China. In short run, Korea has positive relationship of workers remittances with GDP, while China has insignificant in short run (Syed, 2012). This showed that remittances played an important role to promote economic growth because remittances are consider as stable nature to change GDP in short and long run. In long run, the regression results positive and significant impact of remittances on GDP. This is after the researcher used data of top remittances recipient countries (Fayissa and Nsiah, 2010). The other study shown negative and significant relationship is found between remittances and GDP in a long run. They conclude that remittances do not act as source of capital for economic development and obstacles to transfer resources into significant sources of capital (Chami, 2003). On the other past studies, there are positive

impact of remittances on GDP in short run while, negative and significant relationship in long run (Waheeda and Aleem, 2008). Some negative relationship of remittances and GDP has been found in past studies that states remittances only beneficial in short run. If we want to continue for a long run economic growth, countries should increase the foreign exchange earnings through export earnings (Syed, 2012). An increase in worker remittances leads to increase in consumption and investment in recipient countries. The productions also increase because of increase in purchasing power. An increase in investment, consumption and domestic production are all main determinant of GDP (Syed, 2102). Workers remittances can help to reduce the poverty rate in developing countries such as Malaysia.

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Evidence from Latin American Countries (LACs).

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Evidence from Latin American Countries. Middles Tennessee State University. 2010.
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exchange rate. World Bank Policy Research Working Paper 4213. 2007. 8. Manuel Orozco International Financial Flows and Worker Remittances: Best Practices.

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Rate in Sub-sahara African Countries. International Monetary Fund, IMF Working

Paper. 2009. 10. Rayner, Brett, and Joannes Mongardini. Grants, Remittances, and the Equilibrium

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